2. Consider a bullet bond with 6% coupon rate, semi-annual payments, 2 years remaining to maturity, and a principal of 100 (the latest coupon payment today has just been made and is not taken into account). Suppose that we have the following curve of continuously compounded zero-coupon annual interest rates Maturity (years) ZC rate (%) 1.5 1.8 2.2 2.9 0.5 1 1.5 2 (a) [5 marks] Find the price of the bond. (b) [5 marks] Verify that the yield is 2.86% continuously compounded. (c) [5 marks] Find the duration of the bond. Estimate the effect on the bond price if the yield falls to 2%. (d) [5 marks] Consider another bond with 8% coupon rate with semi-annual pay- ments, 2 years remaining to maturity, and a principal of 100. Is this new bond more or less sensitive to changes in interest rates? Justify your answer.